Circular Letter No. 2018-74 issued by Insurance Commissioner Dennis B. Funa late last year said insurance and reinsurance companies could invest either in debt or equity instruments for projects covered by the Philippine Development Plan (PDP), the country’s medium-term socioeconomic blueprint.

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The PDP included the following types of infrastructure: airports, highways, nonrail-based transit facilities, port infrastructure, airports and railways as well as environmental and solid waste management-related facilities and climate change mitigation and adaptation projects, the Insurance Commission (IC) noted in a statement yesterday.

Under the IC circular, insurers may participate as project proponent, financier/sponsor, or operations and maintenance firm.

The new circular creates a new investment channel for insurers and opens new opportunities for insurers to improve risk-adjusted returns, portfolio diversification and asset-liability matching. This circular is aimed at encouraging insurers to invest in domestic infrastructure projects to boost our economy and to reap the benefits of portfolio diversification and higher return,” Funa said.

“With the administration’s Build, Build, Build program in full swing, insurers can take advantage of investing their assets in infrastructure projects to aid them in improving their revenue that would address their compliance with the statutory net worth requirements under the Insurance Code,” Funa added.

“Lack of sufficient funding for infrastructure presents an opportunity for investors with long-term horizon, such as insurance companies, that are positioned to provide capital or funding for infrastructure projects. Taking into consideration the need for insurers to increase their net worth and the clamor for alternative investment channels, we see that the insurance industry can provide for provision for stable and adequate financing to close the infrastructure funding gap,” according to Funa.

Under the circular, investments in infrastructure projects that the regulator approved will be considered admitted assets.

“One of the important features of the new regulation is methodology in calculating the risk factors of the investments in infrastructure to encourage insurer investment while still safeguarding their financial stability,” the IC said.

“Before an investment in infrastructure is approved by the insurance regulator, insurers are required to submit the financial statements of the infrastructure projects which will be evaluated by the regulator to determine the risk impact on the capital of the insurer,” it added.—BEN O. DE VERA

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